SELLING OFF PROPERTY TO BUY VOTES

Economic Reform Serbin Way

Privatization od state property in Serbia, if carried out in the manner proposed, conceals many risks, and this is a sufficient sign that it is dominated by political interests, in other words, that this operation is intended to be used in the forthcoming elections for winning over the electorate

AIM Belgrade, 20 April, 1997

The announced ownership transformation which is an introduction to the all-inclusive economic reform of Serbia, coincides with the forthcoming parliamentary and presidential elections in this Yugoslav federal unit and that is the reason why the proposed solutions cannot but be connected with the flaring up of the battle for power which is also waged in the economic field. Whether resolving of the issue of ownership will remain solely within economic limits or whether the political dimension will prevail, it is possible to see on the basis of the offered concept, that is, whether it will be used just to temporarily feed the "cats", or whether its ambitions are to teach them how to hunt mice. The Serbian Government, or rather its ministry for privatization chose the former possibility, because it is concentrated on the spirit of giving away gifts, which clearly shows the intention of the regime to sell off property in order to buy votes. That is why the economic reform is experienced by the ruling circles as an ideal opportunity to preserve power by means of the offered concept.

It is planned to enable employees to get 14 thousand German marks' worth of shares, and to let them buy additional 6 thousand marks' worth on longterm credit. The gift is very attractive, especially at the time when the monthly salary amounts to 200-300 German marks, but only at first sight. Real market value of donated shares is much lower. In order to prevent recipients of the gift from seeing through the intention, the Government used a trick, and introduced a limitation according to which the donated shares cannot be resold for two years. The intention is quite easily seen through, because this limitation prevents checking the true value of the shares, so the gift can create the impression among the employees that the regime is generous because it is giving away large capital. It is, nevertheless, dead capital, which will remain dead because it is given to those who do not have the economic power to reanimate it by transfusion, because the share-holders themselves do not even have enough "blood" to keep up their own viitality. Connoisseurs have calculated that the package with gifts is three times more valuable than state property.

The Government has chosen the model of gradual and unobligatory transformation of state property, which means that it has preserved the possibility of its persistence, and this implies the conclusion that the regime actually has no intention to renounce its claim to have impact on controlling the property. By doing this, it leaves for itself the material basis to preserve the possibility to rule the citizens by means of capital, under the pretext that the state is the best guardian of property. These explanations are quite obvious, because such solutions create the possibility for a small group of people at the top of the regime to preserve its positions which enable them to transfer fruit yielded by state property in their custody into private channels. Former governor of the National Bank of Yugoslavia, Dragoslav Avramovic, who split with the regime because he had begun to reveal that privatization would in fact be re-establishment of state ownership, believes that sumultaneous existence of social and private ownership is incompatible, because the latter has always increased at the expense of the former.

Apart from criticism of the offered model, Avramovic is preparing to announce his candidacy for President of Serbia, in order to be more efficient in opposing those who intend to "guard" social ownership. His candidacy has not been made public yet, but it is quite certain that he will be nominated for the post by the European Forum for Yugoslavia which is headed by former foreign minister of SFRY Mirko Tepavac, and which gathers many members of the former administration who have refused to support Milosevic's policy.

The offered model also caused suspicion among numerous other experts. Ljubomir Madzar, co-author of the economic reform at the time of Ante Markovic, ironically notes that the Government will by distribution of property award everybody except those who protested for three months because of the theft of votes, because it is assumed that mostly the unemployed participated in the protest. They are not the only ones who should come away empty-handed, because it is impossible to see in the proposed solutions how peasants could get the similar gifts. According to the assessments of certain economists, more than 2 million people would not be able to count on benefits of generosity in distribution of state property.

Contrary to the Government, a considerable number of respectable economists who are politically engaged in opposition parties have essential complaints against the offered concept. Majority of them advocate the opposite approach, in other words, quick privatization which would be compulsory, general and just, everything that the Government project lacks. Swords are crossed over who the state property should be offered to first. Some believe that it should be distributed to the citizens, on the model of the practice of some eastern European countries, but accompanied by immediate opening of the stock market. Drawbacks of this possibility are found in the fact that it offers the possibility of concentrating the capital in the hands of a small group which would buy shares for next to nothing from poor stockholders.

The essence lies in the dilemma whether most of the state property will be distributed to those who had produced it for years, but which has become economically inefficient creating losses, increasing the number of the unemployed, and become uncompetitive because of its obsolete technology, for modernization of which the recipients of gifts have no money. The other approach advocates selling of property to those who can pay for it with sound money, which would create the capital necessary for revival of the economy. Those who would receive this property as a gift are interested, of course, in having its value esteemed as high as possible, while those who have the capital are ready to enter the business only if it is going to be cheaper and freed of the burden of labour surplus. It is believed that the privatization operation will deprive 40 per cent of the employees of their jobs. In view of the fact that the current ratio between the employed and those who are not is about fifty-fifty, it means that Serbia would face a yet unseen wave of unemployment which conceals the threat of an outburst of social unrest, increase of the disturbing rise of the already high crime rate and everything else that accompanies it.

This is, however, the price which has to be paid because of persistent postponement of the start of ecopnomic reforms. In the meantime the state survived with the help of debts, either by taking money away from its citizens or from foreign money lenders. The standpoint is interesting according to which state property should first be used to pay debts and in this way re-establish trust of creditors, because there can be no renewal of savings without it, nor can there be a source of financing development. This is purely economic logic, and since no Serb business can go on without a political ingredient, the announced economic reform should be observed primarily through poilitical eye-glasses.

Ratomir Petkovic